•Meanwhile in markets, steady as she goes. Bonds and stocks are holding on the Iran war relief rally gains. And it will take only a little bit of President Trump sweet talking peace talks to extend those gains;

•Regarding the Iran war, what matters most is that the truce is holding, and that both sides have no desire to return to fighting and are inclined to extend the truce when it expires next week. Pakistan is still mediating between the warring sides. And according to the latest reports, odds clearly favor another round of talks in Islamabad;

•Furthermore, Trump in his own blunt way ‘brokered’ peace talks between the Israeli and Lebanese governments. Both the Israelis and Lebanese were taken by surprise – notice how the President is ushering them towards talks (which would be a first in about thirty years). I guess Trump is craving a Nobel Peace prize after all;

•There’s quite a bit of fog of war regarding the US blockade of the Strait of Hormuz. According to the Beeb, the US blockade is as leaky as the White House, which has become quite the cesspool of insider leaking to the press and trading on inside information. Since the start of the blockade on Monday, fifteen ships passed, with nine having links to Iran. And of those nine, six visited an Iranian port before. Meanwhile, US Central Command claims the blockade is effective, with no ships having passed in the first 48 hours and ten ships having to turn around. Who to believe? The Beeb or US Central Command? Hard to say for an armchair geopolitical expert. Regardless, traffic through the Strait has slowed to a trickle – at best. Before the war, an average of 138 ships transited the Strait every day. Now, every ship passing is a story all by itself;

•Turning to some market commentary, US Treasury yields have barely budged this morning, with yields close to their recent lows. S&P 500 futures are off the highs, though still up modestly for the day. In Europe, the picture is mixed. We record modest gains, with certain markets lagging (DAX, CAC) and others leading (FTSE MIB, IBEX, AEX). The leaders have basically recovered from the war, while the laggards are still notably below pre-war levels;

•ECB rate hike pricing for the April Governing Council meeting has finally taken that mortal blow. ECB leakers and speakers are in unison that it will be a hold later this month. Those leakers are anonymous, of course, but the speakers include none other than the leading hawk, Board Member Schnabel. Perhaps the ECB will pull off a couple of hikes while the Fed comfortably holds rates. Which could be the reason why European markets are slower to recover from the war;

•Brent crude futures prices are trading near the recent lows at around $96 a barrel. European natgas futures prices continue to fall, giving some much needed comfort to our overlords at the ECB. As a matter of fact, we’re now closer to pre-war levels than the March highs. Copper has extended its recent gains, a sign that the economy should hold up well. The nearly uninterrupted rally in Urea prices (used for fertilizers) show that food inflation will definitely become a problem;

•In our neck of the woods, euro money markets, tightening is the name of the game. Following a quiet Q1, when Eurex GC ON rep settled at an average 0.8bps above ECB DFR, we’ve jumped to an average 2.5bps over ECB DFR quarter-to-date. The former was half a bp below my forecast, while the latter is 0.7bp above my forecast;

•Furthermore, Euribors 3m and 6m have more often than not settled decidedly higher than my models imply this month. Since recourse to ECB Eurosystem borrowings remains low, we cannot say that the money market is tighter. But it is tightening. In this regard, it is worth pointing out that excess liquidity is lower than it seems. Notionally at 2.3 trillion euros. But when we subtract the frozen reserves at Euroclear in Belgium, we’re at 2.15 trillion euros.  The lower the level, the more these differences start to matter for spreads;

•Looking ahead, we have plenty of central bank speak to look forward to (ahem) because of the IMF/World Bank spring meetings. On the data docket we only find obligatory US jobless claims.

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